What Is A Trend ?

What exactly is this trend that the investor wants to ride to make money? A rising trend, or uptrend, occurs when prices reach higher peaks and higher troughs. An uptrend looks something like Chart A. A declining trend, or downtrend, is the opposite—when prices reach lower troughs and lower peaks. Chart B shows this downward trend in price. A sideways or flat trend occurs when prices trade in a range without significant underlying upward or downward movement. Chart C is an example of a sideways trend; prices move up and down but on average remain at the same level.

       Charts shows a theoretical example of an uptrend, downtrend, and sideways trend. But, defining a trend in the price of real-world securities is not quite that simple. Price movement does not follow a continuous, uninterrupted line. Small counter-trend movements within a trend can make the true trend difficult to identify at times. Also, remember that there are trends of differing lengths. Shorter-term trends are parts of longer-term trends.

       From a technical analyst’s perspective, a trend is a directional movement of prices that remains in effect long enough to be identified and still be playable. Anything less makes technical analysis useless. If a trend is not identified until it is over, we cannot make money from it. If it is unrecognizable until too late, we cannot make money from it. In retrospect, looking at a graph of prices, for example, many trends can be identified of varying length and magnitude, but such observations are observations of history only. A trend must be recognized early and be long enough for the technician to profit.

How Does The Technical Analyst Make Money

Several requirements are needed to convert pure technical analysis into money. The first and most important, of course, is to determine when a trend is beginning or ending. The money is made by “jumping” on the trend as early as possible. Theoretically, this sounds simple, but profiting consistently is not so easy.

       The indicators and measurements that technical analysts use to determine the trend are not crystal balls that perfectly predict the future. Under certain market conditions, these tools might not work. Also, a trend can suddenly change direction without warning. Thus, it is imperative that the technical investor be aware of risks and protect against such occurrences causing losses.

       From a strategic standpoint, then, the technical investor must decide two things: First, the investor or trader must choose when to enter a position, and second, he or she must choose when to exit a position. Choosing when to exit a position is composed of two decisions. The investor must choose when to exit the position to capture a profit when price moves in the expected direction. The investor must also choose when to exit the position at a loss when price moves in the opposite direction from what was expected. The wise investor is aware of the risk that the trend might differ from what he or she expected. Making the decision of what price level to sell and cut losses before even entering into a position is a way in which the investor protects against large losses.

       One of the great advantages in technical analysis, because it studies prices, is that a price point can be established at which the investor knows that something is wrong either with the analysis or the financial asset’s price behavior. Risk of loss can therefore be determined and quantified right at the beginning of the investment. This ability is not available to other methods of investment. Finally, because actual risk can be determined, money management principles can be applied that will lessen the chance of loss and the risk of what is called “ruin.”

       In sum, the basic ways to make money using technical methods are

      • “The trend is your friend”—Play the trend.
      • Don’t lose—Control capital risk of loss.
      • Manage your money—Avoid ruin.

      Technical analysis is used to determine the trend, when it is changing, when it has changed, when to enter a position, when to exit a position, and when the analysis is wrong and the position must be closed. It’s as simple as that.

2 Simple Price Action Techniques.

2 Simple Price Action Techniques.

The Price Action trading is a way of trading which involves the technical analysis of the historic data of the market.The price action traders usually trade the market without using any indicator.They just focus on a simple chart and use the candlesticks and price bars to trade.Price action trading is most simplest and easy form of trading for the newbies.There are many simple as well as complex methods to use price action in trading but we are discussing just 2 simple methods of price action trading.

1.Price Action with Support and Resistance :

Supports and Resistances are the key points to trade in market.Many people only use support and resistance for their trade.Using price action for calculating and highlighting the key points of market is very easy.You can use candlesticks for this purpose.See the chart below to understand it.

By using the candlesticks or bars,you can easily see all supports and resistances on the chart without using any indicator.These key points give you good stop loss and take profit points.For example,in the above chart you can buy the pair at support level and set your stop loss 10 or 15 pips below the support.In case if the market hits your stop loss and tend to move down,then you can sell the pair on the closing of daily candle below the support and set your stop loss 10 to 15 pips above the support level (by the way,this support have become resistance now).You can set your take profit at the next support level or use Fibonacci Levels.

2.Using Candles Formation in Price Action Trading :

Different types of candlesticks formation take place due to the movement of the market and thees candles also makes some patterns.There are three types of major patterns which indicates the trend of market.

1.Bullish Pattern.
2.Bearish Pattern.
3.Reversal Pattern.